Cutting the Agricultural Price Pie: Power or Justice

Agricultural protection varies considerably among different commodities. To understand inter-industry protection within agriculture, the price-setting neotiation procedure involving producers and consumers. This type of price setting gives farmers an excellent opportunity to affect relative prices. The question is whether the stronger groups have used this situation to affect relative prices to their advantage. Four different price-setting principles are discussed in this paper: inertia, fairness, monopolistic price discrimination, and power. The model is tested by pooling cross-section (13 commodities) and time-series data (1973-83). Fairness and inertia together are the major explanation of the trend in relative prices at the negotiation level. In spite of their strong influence on the price-setting procedure, powerful groups are not missing the situation to their advantage. It is not possible for a farm organization to build its image on the notion of solidarity and at the same time exploit weaker groups. Neither is it possible for farmers to exploit consumers by behaving as price discriminating monopolists and keep the credibility of their organization intact.